Tyson and Mendonca | Why DOGE and Musk will fail

In exchange for helping Donald Trump get re-elected by spending US$130 million on Trump’s and down-ballot Republicans’ campaigns, and turning X into his messaging machine, Elon Musk earned himself the opportunity to co-lead a new ‘Department of Government Efficiency’, along with Vivek Ramaswamy, another major donor.

Named after a joke cryptocurrency, DOGE will not be an official agency. Although its role will be purely advisory, Trump has promised to enact its recommendations to slash excess regulations, restructure federal agencies, and cut wasteful expenditures, all with an eye on efficiency.

Federal law requires that any government advisory committee provide public notice of its meetings – including agenda, time, place, and purpose – and access to any reports, transcripts, minutes, papers, agendas, or other documents relating to its work. But DOGE may well violate these requirements on the grounds that they unconstitutionally infringe on presidential power.

As with his other appointments, Trump will not bother vetting Musk and Ramaswamy thoroughly, nor will he require them to divest their corporate holdings or recuse themselves from offering recommendations on issues raising an obvious conflict of interest, such as with NASA’s extensive purchases of services from Musk’s SpaceX.

To the extent that DOGE eviscerates regulations, it promises to be a powerful vehicle for “crony capitalism”. Its recommendations will have little to do with improving government efficiency or cutting costs, and everything to do with killing regulations and agencies that powerful donors and business lobbyists want dead.

Fortunately, DOGE will fail, because it is focusing on the wrong targets, with the wrong approach, and the wrong leadership. Musk initially promised to cut federal government spending by US$2 trillion, which is nearly one-third of all projected spending for 2025. Having quickly realised how absurd that target was, he has since reduced it by 75 per cent, to US$500 billion.

Defence, Social Security, Medicare, Medicaid, the Affordable Care Act, also known as Obamacare, and interest payments on US government debt together account for 74 per cent of total federal spending.

Moreover, defence spending will likely increase under Trump; spending on interest payments is essential to avoid default on the federal government’s debt; and spending on Social Security, Medicare, and Obamacare is legally required and overwhelmingly supported by the voters who helped re-elect Trump.

The remaining 26 per cent of federal spending covers all other functions of the federal government – from defence discretionary programmes like veterans’ health (12 per cent) to essential non-defence programmes (14 per cent) such as the federal highway system, air traffic control, and the judicial system.

While all funds for discretionary programmes must be authorised by Congress, the new US$500 billion target would encompass both programmes whose congressional authorisation runs out in 2024 and those that Musk considers to be incompatible with original Congressional intentions. But veterans’ health care is the largest single function (US$119 billion) for which congressional authorisation ends in 2024, and despite Trump’s contempt for the military, it is difficult to imagine DOGE going after veterans’ health care.

Instead, DOGE has already indicated that it will cut funding for Planned Parenthood and other progressive groups (US$300 million per year), the Corporation for Public Broadcasting (US$535 million a year), and various international organisations (US$1.5 billion a year). It may also go after bigger discretionary items like the National Oceanic and Atmospheric Administration (US$6.6 billion), which is responsible for the nation’s weather forecasts; the Federal Aviation Administration (US$7 billion), which regulates civil aviation safety; many agencies within the State Department (US$38 billion); and the Education Department (US$29 billion). But NASA (US$25.4 billion), for obvious reasons, will be spared.

The problem with this defunding agenda is that it still comes nowhere close to US$500 billion. If DOGE wanted to try to contribute something positive, it would abandon this target and focus instead on improving the efficiency of the agencies responsible for government programmes, and on eliminating regulations that do not pass a rigorous cost/benefit test.

But this has been tried many times before, and usually without much success. President Ronald Reagan’s Private Sector Survey on Cost Control, known as the Grace Commission, for example, claimed that one-third of all income tax revenues were consumed by waste and inefficiency – a wild overstatement. Very few of the commission’s 2,500 recommendations were implemented, and the combination of Reagan’s tax cuts and a growing federal government launched the national debt on its long upward trajectory.

Similar efforts dating back to President Harry Truman’s Hoover Commission have also been judged “abject failures”. Most flounder because of a fundamental flaw in their design. Led by business leaders who don’t understand how government works, such bodies tend to produce laundry lists of unvetted ideas but have no capacity to carry them out. Implementation remains the responsibility of the relevant agencies and Congress, which legislates and funds federal programmes.

Vice President Al Gore’s National Partnership for Reinventing Government in the early 1990s avoided this design flaw. Housed within the Clinton administration, it was overseen by a cadre of government reformers who succeeded in passing actual legislation: the Government Performance and Results Act of 1993, which aimed to embed performance metrics in the federal government’s standard operating procedures.

Musk and Ramaswamy, by contrast, are merely the latest in a long line of private sector poster children whose business management approaches to government operations will fail. Fewer than one-quarter of all government reform programmes succeed, and those that do have two distinguishing characteristics in common: public sector employees design the reforms and then use digital tools to measure and improve performance.

Unfortunately, Congress does not provide enough funding for agencies to get the tools they need. That is why the Internal Revenue Service has been unable to collect an estimated US$1 trillion of annual revenues from tax evaders and cheaters.

Through no fault of their own, most federal government agencies remain far behind the private sector in the digitisation of their services.

Moving fast and breaking things does not work in government, or in most large private sector organisations, for that matter. If Musk and Ramaswamy want to achieve meaningful, lasting improvements in government efficiency, they will have to collaborate with civil servants to change the ways their work gets done. Success depends on the unsexy, hard-to-implement changes in operational processes that can be embedded in government departments.

Outcome-based procurement, modern talent management (including government rotation programmes for private sector leaders), agile information technology management, data and performance transparency, modern digital tools, and citizen engagement are crucial if we want to improve government performance.

DOGE will produce entertaining memes and photo ops for Musk and X, but it will have little tangible, lasting impact on the size and efficiency of the federal government.

Laura Tyson, a former chair of the President’s Council of Economic Advisers during the Clinton administration, is a professor at the Haas School of Business at the University of California, Berkeley, and a member of the Board of Advisers at Angeleno Group. Lenny Mendonca, Senior Partner Emeritus at McKinsey & Company, is a former chief economic and business adviser to Governor Gavin Newsom of California and chair of the California High-Speed Rail Authority.© Project Syndicate 2024www.project-syndicate.org